Top Traders Unplugged

SI261: The Biggest Story in Asset Allocation ft. Nick Baltas

Sep 16, 2023

Nick Baltas, an investment strategy expert, discusses the shifting tides of investment strategy and the evolving dynamic between equities and bonds. They explore the historical correlation between these asset classes and the impact of inflation on asset allocation. They also touch on topics such as trend following strategies, hedge fund behavior, and the concept of network momentum across different asset classes.

59:19

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Episode guests

Nick Baltas

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Quick takeaways

Dynamic position sizing in trend following helps balance risk and capture gains in varying market environments.

Network momentum in asset classes offers a different perspective on trend following, utilizing the interconnectivity and momentum spill-over between assets within an asset class network.

Deep dives

The Importance of Dynamic Position Sizing in Trend Following

Dynamic position sizing in trend following is crucial for portfolio risk management, allowing for adjustments in exposure based on market conditions. In instances of excessive market downturns, trend followers may buy back positions, reducing exposure as volatility increases. Conversely, during significant market upswings, trend followers may start selling, ensuring a prudent risk allocation. This dynamic position sizing helps to balance risk and capture gains in varying market environments, providing a more diversified and resilient portfolio.

Introduction

3min

Trend Following Update and Equity Allocation

16min

The Relationship Between Equities and Bonds in Portfolios

18min

Upcoming episode, Ray Dalio's view on bonds, and the importance of specifying probability and horizon

3min

Hedge Fund Behavior and Specialist vs CTA Trading

11min

Exploring Network Momentum Across Asset Classes

5min

Encouraging Ratings and Previews, Mentioning Next Episode, and Highlighting Investment Risks

2min

Today Nick Baltas and I embark on a journey through the shifting tides of investment strategy. For decades, equities have reigned supreme as the primary source of portfolio returns, while bonds played a crucial role as diversifiers. But over the past two decades, something intriguing has happened, and the dynamic between these two asset classes has evolved in ways we've never seen before. Stay tuned as we unravel the fascinating story of this transformation and explore what it means for modern investors. We also discuss what a leading Trend Follower describes as what really determins absolute returns in a trend following strategy...and you may be surprised of what it is.

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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE

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Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.

IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.

And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.

Learn more about the Trend Barometer here.

Send your questions to info@toptradersunplugged.com

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Episode TimeStamps:

01:07 - What has caught Nick's attention recently?

03:02 - Industry performance update

04:30 - Q1, Corey: If an investor is heavily weighed equities, are they better off with trend following providers that don't include equities as one of the utilized asset classes

10:31 - How model portfolios can benefit from trend following

19:02 - A Changing Stock-Bond Correlation (AQR Paper)

23:50 - How structural inflation can impact the stock-bond correlation

27:46 - Illiquid alternatives and commodities as diversifiers

35:27 - Significant shifts in the asset allocation space

38:14 - Is cash better than bonds?

41:40 - Paper from Transtrend

47:15 - What really drives the absolute return in a trend following portfolio

52:23 - Network Momentum across Asset Classes (Oxford-Man Institute paper)

57:08 - Thanks for listening

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PLUS: Whenever you're ready... here are 3 ways I can help you in your investment Journey:

1. eBooks that cover key topics that you need to know about

In my eBooks, I put together some key discoveries and things I have learnt during the more than 3 decades I have worked in the Trend Following industry, which I hope you will find useful. Click Here

2. Daily Trend Barometer and Market Score

One of the things I’m really proud of, is the fact that I have managed to published the Trend Barometer and Market Score each day for more than a decade...as these tools are really good at describing the environment for trend following managers as well as giving insights into the general positioning of a trend following strategy! Click Here

3. Other Resources that can help you

And if you are hungry for more useful resources from the trend following world...check out some precious resources that I have found over the years to be really valuable. Click Here

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